Even the Rich Are Being Priced Out of Central London(citylab.com)
citylab.com
Even the Rich Are Being Priced Out of Central London
http://www.citylab.com/housing/2016/09/the-latest-victims-of-london-gentrification-are-the-rich/498536/
215 comments
I suspect it's a pretty common phenomenon. I recently visited Venice with a Venetian friend of mine. He mentioned that most of the apartments in the historical center were empty.
Yes, I rented a flat in Rome right near the Trevi fountain, in a beautiful old stone two storey building with a lovely courtyard. There would have been somewhere between 20 and 40 apartments there.
There was a software / techical business of some sort in one corner, but I don't think I saw anyone else.
(Thank you AirBNB)
There was a software / techical business of some sort in one corner, but I don't think I saw anyone else.
(Thank you AirBNB)
Did you rent the flat from AirBnB then? I'm not understanding your comment.
Why the down vote? seriously? I am asking for clarification because I am interested if you were speaking about the upside or the downside? Its not at all clear.
I didn't downvote you.
The thanks to AirBNB was as an aside. I think we rented AirBNB but to be honest not sure; might have been one of the many other under the radar holiday house schemes available in Italy and other places.
However the phenomenon under discussion clearly makes something like AirBNB possible -- and good luck to them.
Whether it is an upside or downside overall -- I do not know.
(I have now upvoted both of your comments)
The thanks to AirBNB was as an aside. I think we rented AirBNB but to be honest not sure; might have been one of the many other under the radar holiday house schemes available in Italy and other places.
However the phenomenon under discussion clearly makes something like AirBNB possible -- and good luck to them.
Whether it is an upside or downside overall -- I do not know.
(I have now upvoted both of your comments)
I think Venice is a unique situation. It's due to the difficulty and cost involved in the maintenance of buildings which are partially underwater and can not be accessed by a van or truck.
Fair amount of stubborn older people living their, not much ability for a young Italian to take on the task of buying a residence. I spent time there, in a house that reminded me of Fightclub, mostly with Iraqis. No Italians.
Fair amount of stubborn older people living their, not much ability for a young Italian to take on the task of buying a residence. I spent time there, in a house that reminded me of Fightclub, mostly with Iraqis. No Italians.
Yeah thats oddly dystopian.
Can you elaborate on the Vancouver tax change? I have not heard about this.
Can you elaborate on the Vancouver tax change? I have not heard about this.
"Foreigners [not permanent residents] who buy residential property in the Vancouver area will have to pay an extra 15-per-cent tax as part of a B.C. government plan to slow the foreign speculation that many blame for making the region’s homes the most unaffordable in Canada."
http://www.theglobeandmail.com/news/british-columbia/bc-to-t...
The tax is new and was enacted just before August so the impacts are still uncertain.
http://www.theglobeandmail.com/news/british-columbia/bc-to-t...
The tax is new and was enacted just before August so the impacts are still uncertain.
Is there a reason they didn't tax non-use? The "foreigner exclusion" sounds like fighting a symptom.
Simply require proof of residency in the property (or an active lease agreement / market listing) to qualify for a tax break. Otherwise, if you're parking-and-holding-without-using, you get slapped with a higher tax rate.
Simply require proof of residency in the property (or an active lease agreement / market listing) to qualify for a tax break. Otherwise, if you're parking-and-holding-without-using, you get slapped with a higher tax rate.
Something like this was suggested by economists at the local university.
http://www.theglobeandmail.com/news/british-columbia/bc-prof...
The Mayor of Vancouver is also interested in taxing non-occupancy and in the same special session of the legislative assembly that passed the 15% foreign buyer tax the Province granted the City of Vancouver (but not others) the powers to tax non-occupancy. It can be pretty involved to find out occupancy and the City has limited means so it'll be interesting to see if that goes anywhere.
http://www.theglobeandmail.com/news/british-columbia/bc-prof...
The Mayor of Vancouver is also interested in taxing non-occupancy and in the same special session of the legislative assembly that passed the 15% foreign buyer tax the Province granted the City of Vancouver (but not others) the powers to tax non-occupancy. It can be pretty involved to find out occupancy and the City has limited means so it'll be interesting to see if that goes anywhere.
>Is there a reason they didn't tax non-use? The "foreigner exclusion" sounds like fighting a symptom.
The cynical answer to this by the way is that there's a Provincial election in early 2017, so in the near term appearing to address the problem is more important than addressing the problem in an effective way.
The cynical answer to this by the way is that there's a Provincial election in early 2017, so in the near term appearing to address the problem is more important than addressing the problem in an effective way.
Cambridge MA, has a resident tax abatement program. It hasn't seemed to help much as we are starting to see foreign all cash sales...
Starting? It's been rampant for well over a year. We opted out of the whole mess and moved to Salem. $200/sqft for a beautiful historic mansion in an eminently walkable small city that's a quick train ride from North Station. Don't fight it. Just bail.
> Is there a reason they didn't tax non-use?
That would be much more difficult to enforce. You'd have to hire people to walk around knocking on doors or have neighbours snitching on each other. No thanks.
That would be much more difficult to enforce. You'd have to hire people to walk around knocking on doors or have neighbours snitching on each other. No thanks.
Interesting so was this a high profile issue then in Canada and B.C in general. For those unaware, in some places these foreign investors(speculators, non-primary residences.) are getting tax breaks. So not only on their making out on the appreciation on the property but they are receiving tax breaks on top of that:
http://www.businessinsider.com/foreign-billionaire-tax-break...
http://www.businessinsider.com/foreign-billionaire-tax-break...
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I think it remains to be seen whether the Vancouver tax changes have worked. There's been a bit of a slowdown in sales, but that could just be investors taking a brief pause to evaluate the new situation.
They really need it to be an ongoing annual tax increase (ex: vacancy tax).
It's like a capital gains tax versus a wealth tax. The latter has way more impact then the former.
It's like a capital gains tax versus a wealth tax. The latter has way more impact then the former.
8 million people live in London, and the centre is full of people at most times of day, hundreds of thousands of people still live near the areas you're talking about, I went for a picnic in Regent's park last weekend and it was full of kids. Characterising it as an empty city full of vacant units or one in which professionals or parents can't afford to live and parks are empty of children is absurd.
with real estate going up the way it's been going up, do you think 15% really that big of a deterrent?
Foreign investment money is a good thing for a city and country.
Empty buildings are not ideal though (though its still better than less investment). I think maybe there should be a requirement to rent out your investments if it's in a high density area.
Empty buildings are not ideal though (though its still better than less investment). I think maybe there should be a requirement to rent out your investments if it's in a high density area.
I guess I am confused why they would not want to collect the money from renting the buildings out.
Any ideas?
In any city with a high price-to-rent ratio, rent isn't really a factor in prices. Investors are buying homes in those places because it's really hard to make more of them, just like gold and high-end art. The price is determined by what other rich people will pay for them to hold as a speculative asset, just like gold and art. Collecting rent is possible, but it makes an illiquid asset even less liquid: many home buyers want to live in the home they buy, which is hard when there's an active lease.
This does not happen in cities where it's easy to build more homes in desirable areas. They have lower price-to-rent ratios because prices are determined by the value of the rental income stream. We can make it easy to build more homes in every city by repealing laws that push lower income families out of desirable places—that's what density restrictions were invented to do.
This does not happen in cities where it's easy to build more homes in desirable areas. They have lower price-to-rent ratios because prices are determined by the value of the rental income stream. We can make it easy to build more homes in every city by repealing laws that push lower income families out of desirable places—that's what density restrictions were invented to do.
Eviction can be very difficult (1 year +) when it comes time to sell.
Also, it's risk. They can fuck up the place, and if their rent is not much, then the insurance will be more than the rent.
Also, it's risk. They can fuck up the place, and if their rent is not much, then the insurance will be more than the rent.
That's not the case in London. The notice you need to give a tenant is specified by the lease agreement (general an Assured Shorthold Tenancy). It's usually specified as 6 months minimum, after which either tenant or landlord can give 1 month (or sometimes 2) months to end the lease.
If the tenant refuses to move out (despite the landlord serving notice correctly) you can usually get that resolved in 2-3 months at most: 1 month to get a court date, 1 month to give the tenant time to comply with what the court orders, and 1 month to get a bailiff to physically remove them (if it comes to that).
(Source: I'm from London, and I've signed several leases as both a landlord and as a tenant. I've once gone to court to evict a tenant who had stopped paying rent, and the matter was resolved in <2 months from first filling in the court paperwork)
If the tenant refuses to move out (despite the landlord serving notice correctly) you can usually get that resolved in 2-3 months at most: 1 month to get a court date, 1 month to give the tenant time to comply with what the court orders, and 1 month to get a bailiff to physically remove them (if it comes to that).
(Source: I'm from London, and I've signed several leases as both a landlord and as a tenant. I've once gone to court to evict a tenant who had stopped paying rent, and the matter was resolved in <2 months from first filling in the court paperwork)
They don't care. When you have billions in the personal bank accounts, the few tens of thousands you would collect per month from a luxury house in London means nothing.
It would be more of a nuisance - the tenants need registering, then you have to pay taxes, for what gain?
It would be more of a nuisance - the tenants need registering, then you have to pay taxes, for what gain?
A $5 million home rents for roughly $20k a month, or $240k a year.
Probably the owner of said home makes more money than that in his/her sleep.
Passive income on capital assets (e.g. letting out property) is exactly how they make that money.
You hardly have to do anything. Various agencies will do everything for you. You'll never hear about your tenants.
The point is, why would they bother even with the minute hassle of vetting and hiring an agency just to make a few pennies every year as compared to their existing billions?
It's not even worth their time to do that much, apparently, since the houses in question are sitting empty in a high-rent area.
It's not even worth their time to do that much, apparently, since the houses in question are sitting empty in a high-rent area.
A lot of these cities have renting laws that basically give the renter more rights over the property than the owner.
This causes it to make more sense to not rent it out.
This causes it to make more sense to not rent it out.
> A lot of these cities have renting laws that basically give the renter more rights over the property than the owner.
Situated as it is, in Britain, London is a long way from being such a city. More's the pity.
Situated as it is, in Britain, London is a long way from being such a city. More's the pity.
I believe they keep them empty so they can visit at any time. They are their holiday homes.
Some investors buy flats and keep them empty and in bubble wrap for a couple of years until prices increase, then sell. Not "buy-to-let" investors, but "buy-to-sell"!
Some investors buy flats and keep them empty and in bubble wrap for a couple of years until prices increase, then sell. Not "buy-to-let" investors, but "buy-to-sell"!
On the other hand i recently walked through Notting Hill and South Kensington and it wad full of life, with all the flats and houses feeling very much lived in.
In the US, the federal government has acted in a big way to prop up home prices when they threatened to fall.
It's hard to imagine how we can have it both ways: If the government effectively insures real estate against loss, then investors (i.e., people with money) will take advantage of that, increase demand, and raise the price of the investments (i.e., houses you and I want to buy).
It's hard to imagine how we can have it both ways: If the government effectively insures real estate against loss, then investors (i.e., people with money) will take advantage of that, increase demand, and raise the price of the investments (i.e., houses you and I want to buy).
hkmurakami made a very astute comment a few days ago about this:
This housing situation is the most fucked up thing I know of, and I just cannot think of any happy answers to solve these problems for the benefit of everyone in society - it seems any and every decision will favor one party and fuck the other.
> It seems that we made a pact with the devil by positioning housing as an
> investment asset. By doing so, we've encouraged people to commit a very large
> fraction of their net worth into a rather illiquid asset, tying their financial
> fates to the future assessment of that asset. As a result, protecting the price
> and appreciation of this asset has come to overshadow the other crucial roles
> that housing plays in our society.
> If I bought shares in AAPL at $50 (now
> $100+) and someone comes along asking that AAPL let them buy some shares for
> say, $65, I'm obviously not going to be happy since the value of my investment
> is under threat. This is the kind of reaction we've unfortunately promoted for
> ourselves. It didn't have to be this way, as other countries have shown us.
> But now that we're here, it's hard to imagine a way to turn back time.
This housing situation is the most fucked up thing I know of, and I just cannot think of any happy answers to solve these problems for the benefit of everyone in society - it seems any and every decision will favor one party and fuck the other.
It sounds like we're well balanced then.
Markets are efficient.
Markets are efficient.
public policy variables are outside the market efficiency hypotheisis because. markets are therfore not efficient wrt to public policy in general. they only are efficient with repsect to a specificially dilineated (analytically tractavle) public policy context at a single points of time.
And specifically what externality do you think is at play here?
Market effeciency concepts have to do with incorporating information into a (well defined) market. Breaking the logic sequence of "well defined market", which can be done with trivial levels of "real world complexity", is problematic for EMH. This means you cant use EMH as a sort of backward logic to defend the status quo.
As to the concept of a market externality, I'm not sure I understand the question. If you just mean "uncaptured incentives", well surely there are myriads. But the bigger point is that this is not a simple solution. You cannot re-solve the maths as per a case of omitted variable bias.
The reason that this is so may be intuively grasped with an example. Let us posit that rent-seeking is a behavioral consequence of 'opportunistic' principals. And that rent seeking public policy architects are inevitable, because our politician is opportunistic (qua politician--behavioral assumption).
OK, but now I've just made mess for EMH, and this is why EMH has an 'H' in its name. Because general economic theory requires that we assume away several things we just introduced. And if you understand EMH you understand why having opportunistic, strongly authorized, unrestrained public policy makers is a problem. Namely, (1) they hold private information (outside emh); and (2) they are free to play zero-sum dynamic games with market participants; and (3) they can charge economic rents by implementing a 'protection racket' scheme whereby donor/lobbyists avoid (large) zero-sum losses by taking (smaller) zero-sum losses that benefit the policy holder (so called diversions).
As to the concept of a market externality, I'm not sure I understand the question. If you just mean "uncaptured incentives", well surely there are myriads. But the bigger point is that this is not a simple solution. You cannot re-solve the maths as per a case of omitted variable bias.
The reason that this is so may be intuively grasped with an example. Let us posit that rent-seeking is a behavioral consequence of 'opportunistic' principals. And that rent seeking public policy architects are inevitable, because our politician is opportunistic (qua politician--behavioral assumption).
OK, but now I've just made mess for EMH, and this is why EMH has an 'H' in its name. Because general economic theory requires that we assume away several things we just introduced. And if you understand EMH you understand why having opportunistic, strongly authorized, unrestrained public policy makers is a problem. Namely, (1) they hold private information (outside emh); and (2) they are free to play zero-sum dynamic games with market participants; and (3) they can charge economic rents by implementing a 'protection racket' scheme whereby donor/lobbyists avoid (large) zero-sum losses by taking (smaller) zero-sum losses that benefit the policy holder (so called diversions).
You were walking past student accommodation in the summer holidays.
In DC, there's a big glut in foreign capital flowing in from foreign oligarchs and elites, particularly from Russia and China. Residential properties in so-called "safe cities" are both a form of investment and a potential life-raft should the political situation change in their nations.In addition to the artificially low supply created by extreme height limitations, this has caused prices to skyrocket.
The apartment in which my girlfriend and I live now was a cash purchase after only three days on the market with no escrow. It had to be, or someone else would have bested it. If you need a loan to buy? Forget it.
Meanwhile, there are six immaculately tended walk-ups on the block that have been completely empty for the past year, but for the staff.
The apartment in which my girlfriend and I live now was a cash purchase after only three days on the market with no escrow. It had to be, or someone else would have bested it. If you need a loan to buy? Forget it.
Meanwhile, there are six immaculately tended walk-ups on the block that have been completely empty for the past year, but for the staff.
Vancouver recently enacted an anti foreign buyer tax that seems to have almost completely stopped the practice. Curious if we will start to see more and more of this local protionism.
> almost completely stopped the practice
That is way overselling any evidence of what's happened. The tax was enacted less than a month ago. Volumes are way down right now, but the effect on prices are uncertain. I think the consensus is that people are in wait-and-see mode.
That is way overselling any evidence of what's happened. The tax was enacted less than a month ago. Volumes are way down right now, but the effect on prices are uncertain. I think the consensus is that people are in wait-and-see mode.
Unless every desirable city introduces this tax uniformly, doesn't this just shift the burden from Vancouver onto other cities?
This is why it should go viral. Wealthy individuals/ buying houses in droves to sit empty does not benefit anyone in the long run.
What happens when the bubble pops?
What happens when the bubble pops?
I think they should be allowed to buy the homes, but then face stiff property taxes (with a homestead exemption for actual residents). The property taxes on Billionaire's Row in NYC are often absurdly low:
http://www.citylab.com/housing/2015/05/why-billionaires-dont...
http://www.citylab.com/housing/2015/05/why-billionaires-dont...
They will pay pensioners to live there 'on paper' to meet your homestead requirement.
The whole tax penalty is thwarted that way
The whole tax penalty is thwarted that way
Right now I'm paying rent like a sucker when I could be paid to live here instead? Sounds good to me.
At least they'll be occupied that way. Maybe they can even have whole families move in there, with some sort of agreement that they receive a monthly payment in exchange.
If you realitet the oner to live there and pay property taxes is quite risky to use a straw man.
Happily the 421-a exemption program referenced in that article was allowed to expire. Not because of a consensus that it was a bad idea (which it was) but because of a pissing match between the governor and the mayor. We have to take our victories where we can get them; hopefully they'll continue fighting forever.
We still have structural problems in the city property tax code -- for example condo and co-op buildings have to be taxed as if they were rental buildings, a complex calculation that generally undervalues them. But if and when those are fixed, I think full property taxes are would be enough. I don't see the need for a punitive rate on top of that. At least not in NYC, other cities may have a bigger problem with absentee owners.
We still have structural problems in the city property tax code -- for example condo and co-op buildings have to be taxed as if they were rental buildings, a complex calculation that generally undervalues them. But if and when those are fixed, I think full property taxes are would be enough. I don't see the need for a punitive rate on top of that. At least not in NYC, other cities may have a bigger problem with absentee owners.
What happens until the bubble pops I think is the question. To quote the OA...
"In the evenings an eerie stillness settles on [the area]. That’s because these new owners are so rich in both money and global property that their London addresses frequently sit empty, functioning more as dust-sheeted deposit boxes rather than actual homes."
This is not why we have cities. We have cities to allow interaction. Look where the artists, musicians and marginal people are going, for they are the new thing. Hint: it isn't London.
"In the evenings an eerie stillness settles on [the area]. That’s because these new owners are so rich in both money and global property that their London addresses frequently sit empty, functioning more as dust-sheeted deposit boxes rather than actual homes."
This is not why we have cities. We have cities to allow interaction. Look where the artists, musicians and marginal people are going, for they are the new thing. Hint: it isn't London.
I see similar comments on all of these articles and I am really curious which UK/USA/Canada cities that artists and musicians and the like go to.
I'm going to throw out Nashville as a thought for musicians, and maybe Pittsburgh for tinkerers.
I'm going to throw out Nashville as a thought for musicians, and maybe Pittsburgh for tinkerers.
UK artists are heading to Berlin, Paris, Barcelona and Warsaw - at least they were, until Brexit.
Now there's some interest in the cheaper seaside towns - Margate, even Bournemouth.
Brighton used to be on that list but it's almost as expensive as London now. Likewise Bath and Bristol. (Not seaside towns, but a big arts scene in the 60s and 70s, now very much gentrified.)
I suspect if people can't get out they'll head West and North. Parts of the West Country are almost affordable. Parts of the North are very affordable, but they're still in the dilapidation phase and don't seem to be in danger of becoming cool yet.
Now there's some interest in the cheaper seaside towns - Margate, even Bournemouth.
Brighton used to be on that list but it's almost as expensive as London now. Likewise Bath and Bristol. (Not seaside towns, but a big arts scene in the 60s and 70s, now very much gentrified.)
I suspect if people can't get out they'll head West and North. Parts of the West Country are almost affordable. Parts of the North are very affordable, but they're still in the dilapidation phase and don't seem to be in danger of becoming cool yet.
It's tough to figure what pulls a place out of the dilapidation phase. I've heard people say a microbrewery is a good harbinger. I have this unformed suspicion that a hipstery cheap-fancy restaurant can do it, or the "right" art gallery
My area of Brussels has been slowly pulling itself out of dilapidation for decades. The signs are e. g. new bars and shops that don't close after six months, and of course the inevitable loftification of older buildings. There is no single event. It takes masses of people to move, invest, and thrive.
Yes you are right about Margate. It's becoming really popular with artists and artisan craftsman. I don't live there but I can see the growth as more people are moving there from London.
Nashville, Austin, and Boulder are peaking or have peaked. Tech in Philadelphia is right at the tipping point. To skate to where the puck is going, look to the Rust Belt.
Where is it today? I hear Liverpool is having a bit of a renaissance.
Jamaica Street, up as far as Camp and Furnace, but I hear that the end nearer town is being gentrified. And classical musicians and fine artists are heading to Berlin where it is still possible to rent a (effing) flat.
The bubble will be forcefully burst when homeless people start squatting; or pranksters vandalize them.
Sure, the bubble bursting I have no problem with: rich people take a haircut and premises are repurposed. I walk through Digbeth in Birmingham most days: Early Victorian housing that is now car scrap yards and workshops. It all gets recycled.
Anyone who's bought recently with a full mortgage will experience a burst bubble not as a haircut but as a plummet into negative equity. I suppose you could argue that they took on the risk, and other such risk-takers have made big profits. Personally I think it's crazy that individuals are expected to make these huge gambles. But people don't seem to take seriously my suggestion of nationalising land ownership...
While I understand and agree with the sentiment of your comment...
The idea of a tax virus sounds terrifying!
The idea of a tax virus sounds terrifying!
Other cities are welcome to more affordable housing and extra tax revenue by introducing the same tax. Win-win for everyone except wealthy foreign buyers, no?
Yes. Assuming the tax actually works as expected (it's probably too soon to tell now), the burden will be shifted onto other cities that are too stupid or dysfunctional to enact the same tax.
I don't see a problem here. The problem will correct itself eventually, with regular citydwellers all moving to cities smart enough to enact these laws, and abandoning cities like London that become completely unaffordable. Eventually the latter cities will collapse, and these wealthy foreigners' properties will be worthless, like all the $100 houses in Detroit.
I don't see a problem here. The problem will correct itself eventually, with regular citydwellers all moving to cities smart enough to enact these laws, and abandoning cities like London that become completely unaffordable. Eventually the latter cities will collapse, and these wealthy foreigners' properties will be worthless, like all the $100 houses in Detroit.
My condo is Toronto is going up in value pretty quickly. I'm still 100% opposed to the Vancouver tax, but in theory it's making my assets increase in value.
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It does. Should Vancouver not act to protect its own citizens to the best of its ability, then?
The same logic works for all Protectionist legislation. Yet free trade has lowered the costs of nearly every good in our lives.
Free trade maximizes GDP at the cost of further wealth inequality within the closed system of a nation.
There's a tipping point coming fairly soon where voters will logically prefer the short term benefits of protectionism vs additional inequality.
If capitalists want to continue down the path of free trade, they better be prepared to redistribute the additional wealth generated. That or find a way to disenfranchise a whole lot of pissed off citizens.
There's a tipping point coming fairly soon where voters will logically prefer the short term benefits of protectionism vs additional inequality.
If capitalists want to continue down the path of free trade, they better be prepared to redistribute the additional wealth generated. That or find a way to disenfranchise a whole lot of pissed off citizens.
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No it hasn't really.
Technological development has lowered the costs and availability of most things in our lives. If you look at the actual practices of governments and individuals over the last few centuries you won't find much truly free trade. You'll find all kinds of protectionism, exploits of positional control over markets, currency flows (I'm looking at you China), and the occasional super-power deciding to to have a war on ... well slavery was the one that mostly worked.
But free trade? Well, most countries agree that they should be allowed to freely export whatever they want... imports are another matter of course.
Technological development has lowered the costs and availability of most things in our lives. If you look at the actual practices of governments and individuals over the last few centuries you won't find much truly free trade. You'll find all kinds of protectionism, exploits of positional control over markets, currency flows (I'm looking at you China), and the occasional super-power deciding to to have a war on ... well slavery was the one that mostly worked.
But free trade? Well, most countries agree that they should be allowed to freely export whatever they want... imports are another matter of course.
More sales records are being set even after the new tax http://vancouversun.com/business/real-estate/tax-shows-no-si...
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The same thing's happening in Philadelphia, so no doubt New York and DC are running out of places to snatch up. It's insane. I landed a pretty sweet deal on an old building close to the Delaware River for ~$265,000. A vacant lot near us sold for about the same a couple of years before that. This year, the lot behind us went on the market for $600,000 - a number I thought was pretty absurd.
But two days after it had been on the market, I saw a couple of guys walking through the vacant lots. I introduced myself and asked if they had any questions about the neighborhood. In a heavy accent, the younger guy asked "Who owns these other lots? Do you think they would sell them?" They wanted to buy up every vacant lot and wrap our building with condos. I mentioned the vacant lot that had just gone up for $600,000 - the older Russian smiled, saying "We make good offer. Seven hundred thousand cash."
I figured maybe they were boasting. That week, the lot went off the market.
On one hand, I feel like we got in when the getting was good, but on the other hand, I'm not terribly excited about what's going to get built around us. I think my general feeling about it is best summed up as, "Oh boy, here we go."
But two days after it had been on the market, I saw a couple of guys walking through the vacant lots. I introduced myself and asked if they had any questions about the neighborhood. In a heavy accent, the younger guy asked "Who owns these other lots? Do you think they would sell them?" They wanted to buy up every vacant lot and wrap our building with condos. I mentioned the vacant lot that had just gone up for $600,000 - the older Russian smiled, saying "We make good offer. Seven hundred thousand cash."
I figured maybe they were boasting. That week, the lot went off the market.
On one hand, I feel like we got in when the getting was good, but on the other hand, I'm not terribly excited about what's going to get built around us. I think my general feeling about it is best summed up as, "Oh boy, here we go."
If you aren't particularly attached to the area/house, it might be time to cash out and move somewhere more reasonable.
Without getting too into the details, we're improving a small performing arts space on the first floor, a little apartment on the second floor, and building larger apartment on the third floor. If I were doing this for cash, I'd have just built five stories of apartments, and could retire somewhere boring and suburban as an absentee landlord. This is more of a 'fostering the arts' and 'living in a walkable urban environment' thing.
They say you can make a small fortune in theater - you start with a big fortune. You build a theater, and now you've got a small fortune ;)
They say you can make a small fortune in theater - you start with a big fortune. You build a theater, and now you've got a small fortune ;)
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I feel like there is a massive opportunity to be had here from managing and renting out these places.
People dumping hundreds of millions into the market just to hide it from external forces aren't interested in being landlords.
They don't want to make a few percent on their capital?
People who can afford to buy overseas property for cash "just in case" are probably not worried about making an extra $3k/month, not if it adds the headache of being a landlord.
Note that £20-45k/month (US$25-60k/month) is more like the going rate for these properties.
http://www.nestoria.co.uk/mayfair/property/rent/2?price_min=...
But either the owner isn't interested in the money/hassle/attention, or occasionally uses the property — it's difficult to show off your fancy London apartment if people are living in it, and you can't casually lend it to friends or relatives.
http://www.nestoria.co.uk/mayfair/property/rent/2?price_min=...
But either the owner isn't interested in the money/hassle/attention, or occasionally uses the property — it's difficult to show off your fancy London apartment if people are living in it, and you can't casually lend it to friends or relatives.
I reckon people with $25-60/month to rent out these properties would already have enough money to buy their own homes slightly away from the city center
They probably do, but that doesn't mean they want to live there.
I pay $2k to live in a city centre. I could pay half that to live at the edge of the city, but then I'd be at the edge of the city.
I pay $2k to live in a city centre. I could pay half that to live at the edge of the city, but then I'd be at the edge of the city.
They probably don't want any more of a paper trail leading back to them than they have to.
A net zero property seems like it could generate less paperwork if the management balanced incomming and outgoing payments, (less their fee.)
How exactly do they pay utilities/etc without anyone noticing their transfers? But I don't believe they are successfully hiding anything in any case, governments want everyone to be guilty of something so they can achieve whatever political outcome they need through selective enforcement.
How exactly do they pay utilities/etc without anyone noticing their transfers? But I don't believe they are successfully hiding anything in any case, governments want everyone to be guilty of something so they can achieve whatever political outcome they need through selective enforcement.
There are people that behave in ways I considered pretty irrationaly with their capital... and they work out.
If they're getting an absurd percentage increase from property values alone, an extra few percent won't make a difference.
Not everyone min-maxes their capital. Governments probably end up eating them through inflation and taxes in the long run (but in the long run, we're all dead).
If they're getting an absurd percentage increase from property values alone, an extra few percent won't make a difference.
Not everyone min-maxes their capital. Governments probably end up eating them through inflation and taxes in the long run (but in the long run, we're all dead).
There's a better opportunity in buying rundown/condemned places and selling them for 4-6x to overseas money who apparently don't look before buying. See "crackshackormansion" below - everything that's not a mansion is just begging to be flipped.
I'm pretty sure foreign oligarchs aren't interested in AirBnB-style arrangements.
Maybe afarrell wasn't talking about the oligarchs being the ones renting out the spaces.
That's a fair point, and this is merely my opinion, but if I could afford housing all over the world, I certainly wouldn't want to deal with the fact that I maybe cannot go visit London/NYC/wherever on a whim and stay at my own private residence. Renting has downsides even with "perfect renting arrangements" which cannot be mitigated by a third party (well, without presumably breaking an entire host of laws).
That's kind of what I was jokingly suggesting; that the caretakers - who likely are the only ones who see the inside of the place for years - just surreptitiously rent it out from under the actual owner.
Many of these properties are new builds and drop in value as soon as they are 'lived in'.
The problem is much worse here in SV. Lots of all cash buyers from abroad. When I was house hunting last year every house we lost was won buy an all cash foreign buyer. I also know many families where this was also the case.
Russia, New York, LA, S.F., all the same. And there are property developers now who are developing property not for the rank and file of those cities but to attract the hot money from non-residents/non citizens who may only use them a few months out of the year if at all. There doesn't seem to be an in sight either.
Related is this story right now: http://www.nytimes.com/2016/07/21/world/asia/1mdb-malaysia-u...
Related is this story right now: http://www.nytimes.com/2016/07/21/world/asia/1mdb-malaysia-u...
I believe problems with the metro system becoming completely unreliable have also caused prices in DC itself to increase, since it forces people who work in DC to live closer to their jobs.
There is a lot of new construction in different parts of Virginia along the orange line, but the vacancy rates are extremely high. Fewer people want to pay a premium to live by an orange line station with the current problems.
There is a lot of new construction in different parts of Virginia along the orange line, but the vacancy rates are extremely high. Fewer people want to pay a premium to live by an orange line station with the current problems.
The Onion proves itself prescient yet again:
http://www.theonion.com/article/report-nations-gentrified-ne...
http://www.theonion.com/article/report-nations-gentrified-ne...
WASHINGTON—According to a report released Tuesday by the Brookings Institution, a Washington-based think tank, the recent influx of exceedingly affluent powder-wigged aristocrats into the nation's gentrified urban areas is pushing out young white professionals, some of whom have lived in these neighborhoods for as many as seven years.
All joking aside, 7 years is longer than anyone I know to be living in the same location. The article's satire nails it.
All joking aside, 7 years is longer than anyone I know to be living in the same location. The article's satire nails it.
nottheonion: http://i.imgur.com/jb61R2B.jpg
i need to quote your link so nobody misses this gem:
> ...many Palo Altans said the project was too big and moving too fast. "It just seems to me that a billionaire can come in and get whatever he wants and run roughshod over average millionaires like myself," said Crescent Park Neighborhood Assocition presi...
> ...many Palo Altans said the project was too big and moving too fast. "It just seems to me that a billionaire can come in and get whatever he wants and run roughshod over average millionaires like myself," said Crescent Park Neighborhood Assocition presi...
What paper is this? Is it available online? I hope you framed that.
That's pretty special.
Is that Vint Cerf on the right in the photo? :)
The problem is not specific to foreign investors. Local investors are also more than capable of buying up perfectly good homes and letting them sit there vacant and unused. Whether the people are foreign has nothing to do with it. The problem is that society tolerates this practice of investors swallowing up housing, pricing people out of the market, and then leaving perfectly those good homes vacant.
Couldn't the solution be simply to enact a sufficiently punishing property tax rate on property not owner-occupied for more than 300 days of the year, so that these "investments" lose money? That would stop the practice, and maybe we'd see actual people/families moving in again.
Couldn't the solution be simply to enact a sufficiently punishing property tax rate on property not owner-occupied for more than 300 days of the year, so that these "investments" lose money? That would stop the practice, and maybe we'd see actual people/families moving in again.
So your solution is to put an end to the rental market?
[deleted]
A land value tax (famously advocated by early political economist Henry George of San Francisco) does exactly this: you tax the unimproved portion of the value of property, and don't tax improvements. Land that has high value unimproved therefore costs money to sit idle; this encourages landlords to make improvements, rent out their space, etc. It also means landlords don't benefit from the portion of value that does NOT stem from their improvements, i.e., it discourages speculation.
It also has the added benefit of making productive investment (e.g. in a business) relatively more attractive than what many choose to do now - i.e. purchase property with the intention of capturing much of the value (in the form of capital gains) created by public investment.
A rentier economy is neither sustainable nor desirable.
A rentier economy is neither sustainable nor desirable.
And... this is what happens when you don't tax foreign cash infusions.
For those who think we should get rid of taxes on cash repatriations - this is likely an outcome.
For those who think we should get rid of taxes on cash repatriations - this is likely an outcome.
This is what happens when Russian Oligarchs make undisclosed income and need to was their rubles into Euros and Dollars.
Foreign capital investment is great, so beneficial to the economy.
The problem is with the housing market. Perverse subsidies, out of date zoning laws, and a lot of nimby based lobbying. Fix these things and I doubt anyone, including foreign investors, would be parking capital in property and just leaving it unused.
The problem is with the housing market. Perverse subsidies, out of date zoning laws, and a lot of nimby based lobbying. Fix these things and I doubt anyone, including foreign investors, would be parking capital in property and just leaving it unused.
And that's why you use a tool like taxation to modify behavior to encourage positive outcomes.
Taxation shouldn't be used as a tool to modify behavior. That's actually the exact opposite of good tax policy. Taxes should be broad based, with few exemptions, to raise the needed revenue while minimizing side effects.
The distortions in housing markets are often partially caused by tax policy, and those areas should be addressed (tax deductions for mortgage interest for example). Other than that, it's best to actually deal with the root problem: outdated zoning laws.
The distortions in housing markets are often partially caused by tax policy, and those areas should be addressed (tax deductions for mortgage interest for example). Other than that, it's best to actually deal with the root problem: outdated zoning laws.
Taxation is a great tool for changing behaviour in many places.
That's a very parochial view. Foreign capital investment is just a form of economic colonialism, unless properly managed to mitigate the risks it introduces.
Building more houses is great. Buying the same houses for increasingly higher prices is not that great.
> And... this is what happens when you don't tax foreign cash infusions.
Why would you do that?! It's basically free cash flowing into the local economy, it would be absurd to "tax it". Am I missing something?
Why would you do that?! It's basically free cash flowing into the local economy, it would be absurd to "tax it". Am I missing something?
They are purchasing land. Increases in land value tend be due to public investment. Much of the value created is captured by someone overseas (i.e. leaves the local economy).
Plenty that you're missing:
1. At some point it's foreign money buying from other foreign owners who don't live there, and who use the proceeds to buy an even more costly money box/laundery
2. It reduces rental supply and prices out locals who then have to spend money on commuter expenses
3. Even if the above weren't true it's debatable how much of the purchase price actually flows into the local economy
1. At some point it's foreign money buying from other foreign owners who don't live there, and who use the proceeds to buy an even more costly money box/laundery
2. It reduces rental supply and prices out locals who then have to spend money on commuter expenses
3. Even if the above weren't true it's debatable how much of the purchase price actually flows into the local economy
What bothers me is that price rises but those are the same crappy apartments. When a flat costs millions I'd expect it to be absolute marvel of modern technology.
Property is entirely about who you outbid, not what the property is. Even my modest house in Scotland has an insurance rebuild cost of half its value.
Meanwhile someone in London bought a derelict garage for over half a million: http://www.telegraph.co.uk/finance/property/house-prices/111...
The solution will have to be punitive taxes on nonresident overseas owners. Preferably removing the council tax cap too.
Meanwhile someone in London bought a derelict garage for over half a million: http://www.telegraph.co.uk/finance/property/house-prices/111...
The solution will have to be punitive taxes on nonresident overseas owners. Preferably removing the council tax cap too.
There is no financial incentive. People have their heart set on living in a super-popular city, but they won't pay extra for nicer finishing. They find all available money, then take out a loan that's 100% of their income (their income will go up over time, after all), and buy whatever is available.
You can get a nice apartment, but you're talking double or triple the price of common "the walls were last painted in 1872" apartment. There was a nice 750sq ft. apartment in Brooklyn Heights I was looking at recently. 3 million dollars. Who has this kind of money!? (The key is being married to someone that makes as much money as you do; for me, 1.5-2 million dollars would then be very conservative. Good luck if you're single or your spouse doesn't work.)
Fortunately, this is a New York-ism. If you're willing to move west (not to California of course!) then you can get a super nice home in a nice city for hardly any money at all.
You can get a nice apartment, but you're talking double or triple the price of common "the walls were last painted in 1872" apartment. There was a nice 750sq ft. apartment in Brooklyn Heights I was looking at recently. 3 million dollars. Who has this kind of money!? (The key is being married to someone that makes as much money as you do; for me, 1.5-2 million dollars would then be very conservative. Good luck if you're single or your spouse doesn't work.)
Fortunately, this is a New York-ism. If you're willing to move west (not to California of course!) then you can get a super nice home in a nice city for hardly any money at all.
Absolutely, I have been battling this lately with a 50 year old coop in Manhattan that needs renovation. The magnitude of pain involved is unbelievable. You want to strip and paint those 1872 walls? Guess what, lead-based paint, inspections, permits, abatement, management company, board approval, etc, the list goes on.
It's basically not economical to re novate anything if you value your time, so if you value living anywhere nice you have to pay the 2000/sqft give or take for something modern.
It's basically not economical to re novate anything if you value your time, so if you value living anywhere nice you have to pay the 2000/sqft give or take for something modern.
Why do you think they're crappy?
I'm not sure what the price range under discussion is, but here are a few from Mayfair.
£11M, seems fancy: http://www.zoopla.co.uk/for-sale/details/40591729
This one seems to be in a new building, £32M: https://www.onthemarket.com/details/2192886/ (home automation, panic room, aquarium etc; would suit criminal mastermind...)
This is much cheaper, £2.6M: http://www.zoopla.co.uk/for-sale/details/41018778
If there's an out-of-date interior, it will be no trouble at all for the buyer to spend 1% of their purchase price on getting it redone.
I'm not sure what the price range under discussion is, but here are a few from Mayfair.
£11M, seems fancy: http://www.zoopla.co.uk/for-sale/details/40591729
This one seems to be in a new building, £32M: https://www.onthemarket.com/details/2192886/ (home automation, panic room, aquarium etc; would suit criminal mastermind...)
This is much cheaper, £2.6M: http://www.zoopla.co.uk/for-sale/details/41018778
If there's an out-of-date interior, it will be no trouble at all for the buyer to spend 1% of their purchase price on getting it redone.
Sorry for the flash.
http://www.crackshackormansion.com/index.html
http://www.crackshackormansion.com/index.html
$1M Canadian is less than £600,000 — that's at least an order of magnitude less than the properties the article will be about. Try a search like [0]. Notice that ⅓ of the properties cost more than £6,000,000! Only 4 (2½%) cost less than $1M.
I didn't give this link before as there are no pictures, but the first hit from my previous search was this one — £60M, marble throughout and a swimming pool: http://www.primelocation.com/for-sale/details/41341420
[0] http://www.nestoria.co.uk/knightsbridge/property/buy
I didn't give this link before as there are no pictures, but the first hit from my previous search was this one — £60M, marble throughout and a swimming pool: http://www.primelocation.com/for-sale/details/41341420
[0] http://www.nestoria.co.uk/knightsbridge/property/buy
There's two components to real estate prices: the cost of the actual building (if any), and the price of the land. The building cost is measurable, and basically equals the cost of rebuilding it (unless it's historic), and that's what you insure the property for. The rest is the land value, and that's determined entirely by the market, because land is not fungible. A quarter-acre in a prime metro-area neighborhood is likely worth much more than 100 acres in the middle of nowhere, because lots of people want to live there and are willing to pay for that privilege.
So, if you find some property in downtown London that just has a crappy shack on it, it'll still be highly valuable just because of the location. A wealthy buyer can purchase it, then raze the shack and build something better there.
So, if you find some property in downtown London that just has a crappy shack on it, it'll still be highly valuable just because of the location. A wealthy buyer can purchase it, then raze the shack and build something better there.
I'm shocked that london, vancouver, SF and a few other cities are still functional. When working lawyers and doctors can no longer afford to live in a city, what actually happens? Are these now theme parks? Retirement villages for the uber-wealthy?
Some (SF, seattle) have developed this strange mix of the very very rich and the homeless on the street. Others (Vancouver) see inverted traffic patterns as more professionals (carps etc) drive into residential neighborhoods to work on houses than residents drive out. Suburbs are now industrial zones, places where people go to work. Anyone who can afford to live in the suburb, in a detached house, can live on investments alone.
I ran into a teacher from my old school last year. In my day, the school built doctors and lawyers. Everyone went to university. Now, the kids are so rich that they have no drive. None want to be doctors anymore. Doctors have to touch sick people. How do you motivate a kid who knows he has a guaranteed job at his parent's investment firm, that has trust portfolios that will support him forever?
Some (SF, seattle) have developed this strange mix of the very very rich and the homeless on the street. Others (Vancouver) see inverted traffic patterns as more professionals (carps etc) drive into residential neighborhoods to work on houses than residents drive out. Suburbs are now industrial zones, places where people go to work. Anyone who can afford to live in the suburb, in a detached house, can live on investments alone.
I ran into a teacher from my old school last year. In my day, the school built doctors and lawyers. Everyone went to university. Now, the kids are so rich that they have no drive. None want to be doctors anymore. Doctors have to touch sick people. How do you motivate a kid who knows he has a guaranteed job at his parent's investment firm, that has trust portfolios that will support him forever?
> How do you motivate a kid who knows he has a guaranteed job at his parent's investment firm, that has trust portfolios that will support him forever?
You don't. And that's why (among other factors) most families squander their wealth within two generations.
You don't. And that's why (among other factors) most families squander their wealth within two generations.
>Others (Vancouver) see inverted traffic patterns as more professionals (carps etc) drive into residential neighborhoods to work on houses than residents drive out. Suburbs are now industrial zones, places where people go to work. Anyone who can afford to live in the suburb, in a detached house, can live on investments alone.
Do you have a source that more people are driving from the Vancouver core out than in?
I wouldn't describe Vancouver this way. The region was planned to have many regional centres, so that there is no mass migration from the 'burbs into the downtown. Instead people live and work everywhere.
There are more people working in downtown Vancouver than ever before, but traffic volumes in have been unchanged since the 60s. This is possible because of public transit and massive increases in the amount of residential density in downtown enabling people to walk to work.
Do you have a source that more people are driving from the Vancouver core out than in?
I wouldn't describe Vancouver this way. The region was planned to have many regional centres, so that there is no mass migration from the 'burbs into the downtown. Instead people live and work everywhere.
There are more people working in downtown Vancouver than ever before, but traffic volumes in have been unchanged since the 60s. This is possible because of public transit and massive increases in the amount of residential density in downtown enabling people to walk to work.
They don\t commute from the core to the burbs. They move in from the hinterlands. People living in chilliwack, burnaby, Squamish and even further afield are commuting in. They are working on houses, on the industry that is every-rising house prices.
Watch the lions gate bridge or the upper levels highway on the north shore. Watch what rush hour is these days. The 7:30-8:30 rush across the bridge is barely a thing. Now it's thousands of pickup trucks driving into the burbs at around 6:30, ready to fire up tools come 7am.
Watch the lions gate bridge or the upper levels highway on the north shore. Watch what rush hour is these days. The 7:30-8:30 rush across the bridge is barely a thing. Now it's thousands of pickup trucks driving into the burbs at around 6:30, ready to fire up tools come 7am.
Its been an interesting year for stories about how hot capital moves through the "globalized" world. It seems that there's been an uptick in these types of stories. Is there a connection with this uptick and the release of the Mossack Fonseca "Panama Papers" or is it simply getting harder and harder for obscene amounts of money to be discreet?
My mother used to live in Belgravia, in one of the buildings pictured in that article, when she was a young girl.
....well when I say lived there, my grandparents were caretakers so they lived in the basement.
This was back in the 1960s mind, but even back then Belgravia was an extremely affluent area, with Lords, major industrialists etc living there.
....well when I say lived there, my grandparents were caretakers so they lived in the basement.
This was back in the 1960s mind, but even back then Belgravia was an extremely affluent area, with Lords, major industrialists etc living there.
> living there
Most of the home owners referred in the article don't live there for more than a few weeks a year - if at all - there is a material inbalance
I live in a village where people buy 2nd homes or they buy to retire - the locals slowly drift away to nearby towns to live in shared accommodation
The life gets sucked out of the village over time - house prices go up - but the problem is deeper than that - the school closes, the public transport frequency reduces (nobody commutes), the local shop closes (as pensioners/visitors buy online for delivery), the pub closes ... the only infrastructure with any growth is the doctor surgeries - more of those are planned right across the county
It's not a sustainable position - there are 2 families in a village with 80+ houses - the few businesses that are left have no pool of resource to hire from - we live next to a cow farmer with 400+ cattle - he has no help - in any normal world he wouldn't be working from 6am to nightfall like that
Most of the home owners referred in the article don't live there for more than a few weeks a year - if at all - there is a material inbalance
I live in a village where people buy 2nd homes or they buy to retire - the locals slowly drift away to nearby towns to live in shared accommodation
The life gets sucked out of the village over time - house prices go up - but the problem is deeper than that - the school closes, the public transport frequency reduces (nobody commutes), the local shop closes (as pensioners/visitors buy online for delivery), the pub closes ... the only infrastructure with any growth is the doctor surgeries - more of those are planned right across the county
It's not a sustainable position - there are 2 families in a village with 80+ houses - the few businesses that are left have no pool of resource to hire from - we live next to a cow farmer with 400+ cattle - he has no help - in any normal world he wouldn't be working from 6am to nightfall like that
The reason that housing is increasing in cost is because of a market failure where politics is used to create housing scarcity, called "economic rents." In this case, the use of politics to create zoning laws that place artificial restrictions on housing density. As in any form of "economic rents", this benefits a special interest group -- in this case the landlords over the general population of rents and buyers of houses.
In another case of politics creating scarcity was the artificial limit of 13,000 taxi medallions in NYC. Uber/Lyft fixed this scarcity by increasing the supply of taxi-like vehicles while lowering the cost of taking these vehicles. The price of a taxi medallion was $1.2 million prior to Uber/Lyft is now $700,000. With the political restriction on taxi medallions effectively eliminated, the "taxi landlords" lost out and the consumer gained.
London, NYC, DC, Boston, LA, SD, SF and other cities all have these restrictive zoning laws that artificially limit density to increase housing costs.
Economics Nobelest and NYTimes columnist Paul Krugman has discussed this.
Harvard Economist and city expert Edward Glaeser has written extensively on this topic. Financial Times columnist (with a BS and MS in Economics from Oxford) addresses this topic in "The Undercover Economist." He discusses how in the 1930's London had Green Belt (park) surrounding the city installed which has resulted in increased housing prices for landlords. But bad zoning laws that limit housing density has also contributed.
See: Edward Glaeser: Build Big Bill http://www.nydailynews.com/opinion/build-big-bill-article-1....
Tim Harford: The Undercover Economist (2nd Ed). This book has sold over 1 million copies https://www.amazon.com/dp/0199926514/
David Ricardo explained this in 1817. David Ricardo: On the Principles of Political Economy and Taxation http://www.econlib.org/library...
See Ch 2.3 - 2.5
In another case of politics creating scarcity was the artificial limit of 13,000 taxi medallions in NYC. Uber/Lyft fixed this scarcity by increasing the supply of taxi-like vehicles while lowering the cost of taking these vehicles. The price of a taxi medallion was $1.2 million prior to Uber/Lyft is now $700,000. With the political restriction on taxi medallions effectively eliminated, the "taxi landlords" lost out and the consumer gained.
London, NYC, DC, Boston, LA, SD, SF and other cities all have these restrictive zoning laws that artificially limit density to increase housing costs.
Economics Nobelest and NYTimes columnist Paul Krugman has discussed this.
Harvard Economist and city expert Edward Glaeser has written extensively on this topic. Financial Times columnist (with a BS and MS in Economics from Oxford) addresses this topic in "The Undercover Economist." He discusses how in the 1930's London had Green Belt (park) surrounding the city installed which has resulted in increased housing prices for landlords. But bad zoning laws that limit housing density has also contributed.
See: Edward Glaeser: Build Big Bill http://www.nydailynews.com/opinion/build-big-bill-article-1....
Tim Harford: The Undercover Economist (2nd Ed). This book has sold over 1 million copies https://www.amazon.com/dp/0199926514/
David Ricardo explained this in 1817. David Ricardo: On the Principles of Political Economy and Taxation http://www.econlib.org/library...
See Ch 2.3 - 2.5
The zoning story is pretty much bullshit and is told by developers that want to replace the buildings with even lower density, shittier but still pricier buildings.
The Eixample district in Catalonia has one of the highest population densities in the western world without high-rises: https://en.wikipedia.org/wiki/Eixample Its population density is higher than the one in Manhattan and probably also any parts of the other cities you listed. It didn't achieve that by ditching zoning laws.
The Eixample district in Catalonia has one of the highest population densities in the western world without high-rises: https://en.wikipedia.org/wiki/Eixample Its population density is higher than the one in Manhattan and probably also any parts of the other cities you listed. It didn't achieve that by ditching zoning laws.
Actually, if you read the references by the economists that I cite, in most situations the developers want to maximize profits which means building for higher density. In much of Manhattan, for example, there are many areas with low 6 story brownstones that could be replaced by higher towers, but the zoning laws don't permit this. In London, where I have lived for about 6 months altogether and in the American cities I mention, the issue is bad use of land because of poor zoning codes.
I lack the experience to comment on the situation that you mention relating to Catalan.
I lack the experience to comment on the situation that you mention relating to Catalan.
It's absurd that private citizens can own land now. What was the crown thinking?
[deleted]
Can anyone explain the purported benefits to society of allowing non-resident foreigners to own residential property?
Who is this supposed to benefit? I mean, other than real estate agents, solicitors / conveyancer, and the initial citizen who sold the property.
What prevents us (whoever 'us' is in your case) from banning foreign non-resident residential property ownership.
Who is this supposed to benefit? I mean, other than real estate agents, solicitors / conveyancer, and the initial citizen who sold the property.
What prevents us (whoever 'us' is in your case) from banning foreign non-resident residential property ownership.
Banning foreign non-residential ownership is insane! You apparently want to live in a world where people are not allowed to buy a holiday cottage in France? Or prevent people from buying a city pied-a-terre and a country house? If I have the money, and I want to purchase another house in another country or city, I should absolutely be able to do so, and I cannot imagine a world where this would ever not be the case... And, to answer your question, purchasing the house benefits me, the owner. I now have my own place to stay in another country or city, whenever I want to go there.
True, good point. I might conjecture that not-banning non-resident ownership is proving to be a bit wobbly too though.
I suppose I should say something like: as we more in to a world where more and more people have the ability to access foreign residential property as an investment class we might need to rethink the rules around foreign non-resident property ownership for residential property, under some circumstances, perhaps, maybe.
I suppose I should say something like: as we more in to a world where more and more people have the ability to access foreign residential property as an investment class we might need to rethink the rules around foreign non-resident property ownership for residential property, under some circumstances, perhaps, maybe.
> the initial citizen who sold the property
These people are pensioners (or soon-to-be) who:
a) vote in droves b) need to flip their houses at a huge profit to pay for their retirements because they don't have enough savings otherwise
> Can anyone explain the purported benefits to society of allowing non-resident foreigners to own residential property?
It's an easy and popular (amongst voters!) way to have foreigners pay for the care of your aging population. I'm not surprised at all there's little political will to stop it.
These people are pensioners (or soon-to-be) who:
a) vote in droves b) need to flip their houses at a huge profit to pay for their retirements because they don't have enough savings otherwise
> Can anyone explain the purported benefits to society of allowing non-resident foreigners to own residential property?
It's an easy and popular (amongst voters!) way to have foreigners pay for the care of your aging population. I'm not surprised at all there's little political will to stop it.
I wonder how much of the empty apartments are caused by laws which make it risky to rent, by making it hard to get rid of a tenant in a timely matter.
I'm reminded of the Rolling Stones' Play With Fire:
Now she gets her kicks in Stepney not in Knightsbridge anymore.I cringe at some of the comments here where people have already written off cities like sf, vancouver, London, DC etc. Their entire perception of those places is through a couple sensationalist news pieces.
Really? Because I either live in or have spent a fair amount of time in those places and I promise you there's no overblown rhetoric involved here. This is what happens when a significant fraction of the world that previously was unable and unwilling to relocate suddenly begins spreading across the globe. Not only is what's going on real, it was easily predicted decades ago.
If they aren't living there, why don't they just rent a lot of the houses out? I guess they don't need the money but that has always struck me as weird.
Because these houses are also safe retreats in case of upheaval in their home countries, and renters are occasionally hard to evict.
I believe this is to not draw attention to the property. There was a Planet Money podcast a while ago about how high-end real estate is being used by foreigners to launder money. If the FBI catches wind, they have tools to seize the property and remunerate the proceeds.
I'm guessing that renting the property means involving the IRS and potentially their foreign counterparts in the person's home country, both of which could increase the likelihood of getting caught.
I'm guessing that renting the property means involving the IRS and potentially their foreign counterparts in the person's home country, both of which could increase the likelihood of getting caught.
This has nothing to do with the FBI or IRS; it's in London.
The UK's territories include several actual tax havens (the Channel Islands, Isle of Man, Virgin Islands, Bermuda, Cayman etc). Many tens of thousands of houses are owned by corporations registered in an offshore tax haven.
There's a map of British property registered in a tax haven: http://www.private-eye.co.uk/registry
The UK's territories include several actual tax havens (the Channel Islands, Isle of Man, Virgin Islands, Bermuda, Cayman etc). Many tens of thousands of houses are owned by corporations registered in an offshore tax haven.
There's a map of British property registered in a tax haven: http://www.private-eye.co.uk/registry
I was speaking in general, as this problem is not just specific to London. It's a common issue in the US as well.
IRS requires reporting of income and bank balances from overseas sources and institutions. They collect tax on them.
Of USA citizens, not the whole world
They don't rent them out.
Source: am Vancouverite
Source: am Vancouverite
Squatters seem like they would cause a problem. These places probably have staffs for the upkeep though.
A colleague has a cousin that owns at least a couple of properties like this.
The penthouse apartment was available at all times to impress visitors (e.g. my colleague), and included a chauffeur who acted as a tour guide. The owner used it himself occasionally, if he was visiting the city for a business trip.
The penthouse apartment was available at all times to impress visitors (e.g. my colleague), and included a chauffeur who acted as a tour guide. The owner used it himself occasionally, if he was visiting the city for a business trip.
It's because there's a clear mathematical relationship between the price someone is willing to rent, the prevailing interest rate and the price a property is worth.
As an owner, you don't want that information to get out.
As an owner, you don't want that information to get out.
It's interesting how this seems to play out politically.
- Wealthy foreigners purchase property primarily as an investment.
- Said property is left vacant or only used infrequently.
- Locals that would otherwise have lived in these wealthy neighbourhoods start purchasing elsewhere.
- A chain reaction occurs putting pressure on prices down through the market.
- This is interpreted as a shortage of homes.
- Poorer immigrants are blamed for the increased demand.
I'm certainly not suggesting that this is sole reason for rising property prices (I think buy-to-let is probably a bigger issue), but I think that the simple assumption that most people make - i.e. that there is simply a shortage of homes is lazy and likely incorrect. There are two sides to the supply and demand equation and the typical focus on the supply side as the underlying issue is problematic.
In my opinion, more attention should be given to the demand side of the equation. A speculative boom creates demand - not for homes but for 'investment' opportunities.
There is a survey carried out each year in Melbourne (a city with similar property market problems to London and Vancouver) by an organisation called Prosper Australia. It is called the 'Speculative Vacancies Report' and is conducted using an interesting methodology.
Typically, the vacancy rates you hear about in the media are sourced from the real estate industry and are collected by asking agencies what percentage of properties on their books are currently vacant. A typical response is something like 3%.
The Prosper Australia report instead looks at water usage per property and shows much higher vacancy rates (close to 30% in some areas of Melbourne). Interestingly, higher vacancy rates correlate with areas that have higher price appreciation. This is not at all intuitive if you assume a simple relationship between supply of residences and demand for homes. It is more understandable if you consider that the demand side is in large part driven by people seeking speculative investment opportunities rather than homes.
Given all of this, I think that the solution is not to be found in building more homes (likely to make any crash worse) but in making property less attractive as an investment. In many markets, this wouldn't mean punitive measures but instead removing existing incentives and possibly better regulation of lending so as to ensure banks and investors are left in no doubt that the risks they take when speculating (especially leveraged speculation) are their own responsibility and the taxpayer will not prop up the market for their benefit when prices stop rising (I say 'stop rising' and not 'fall' here because in a speculative boom that should be sufficient to lead to a fall if it lasts long enough).
- Wealthy foreigners purchase property primarily as an investment.
- Said property is left vacant or only used infrequently.
- Locals that would otherwise have lived in these wealthy neighbourhoods start purchasing elsewhere.
- A chain reaction occurs putting pressure on prices down through the market.
- This is interpreted as a shortage of homes.
- Poorer immigrants are blamed for the increased demand.
I'm certainly not suggesting that this is sole reason for rising property prices (I think buy-to-let is probably a bigger issue), but I think that the simple assumption that most people make - i.e. that there is simply a shortage of homes is lazy and likely incorrect. There are two sides to the supply and demand equation and the typical focus on the supply side as the underlying issue is problematic.
In my opinion, more attention should be given to the demand side of the equation. A speculative boom creates demand - not for homes but for 'investment' opportunities.
There is a survey carried out each year in Melbourne (a city with similar property market problems to London and Vancouver) by an organisation called Prosper Australia. It is called the 'Speculative Vacancies Report' and is conducted using an interesting methodology.
Typically, the vacancy rates you hear about in the media are sourced from the real estate industry and are collected by asking agencies what percentage of properties on their books are currently vacant. A typical response is something like 3%.
The Prosper Australia report instead looks at water usage per property and shows much higher vacancy rates (close to 30% in some areas of Melbourne). Interestingly, higher vacancy rates correlate with areas that have higher price appreciation. This is not at all intuitive if you assume a simple relationship between supply of residences and demand for homes. It is more understandable if you consider that the demand side is in large part driven by people seeking speculative investment opportunities rather than homes.
Given all of this, I think that the solution is not to be found in building more homes (likely to make any crash worse) but in making property less attractive as an investment. In many markets, this wouldn't mean punitive measures but instead removing existing incentives and possibly better regulation of lending so as to ensure banks and investors are left in no doubt that the risks they take when speculating (especially leveraged speculation) are their own responsibility and the taxpayer will not prop up the market for their benefit when prices stop rising (I say 'stop rising' and not 'fall' here because in a speculative boom that should be sufficient to lead to a fall if it lasts long enough).
we are not managing the land area efficiently as a result the major cities are getting overpopulated. I don't understand the point of paying millions for a 1/2 bedroom apartment in the middle of a city and then complain about city traffic and congestion.
Oh no; the rich aren't rich enough guys!
I mean, it's a pretty common sentiment around these parts.
(Replace "London" with "Bay Area")
(It's a very rare person who ever thinks of themselves as "rich enough." Most billionaires don't)
(Replace "London" with "Bay Area")
(It's a very rare person who ever thinks of themselves as "rich enough." Most billionaires don't)
While I do enjoy the irony of this situation and your post, the schadenfreud isn't helpful. We're all in this boat together:
When an unbridgeable gap is opening up between even the traditional "elite" (bankers, lawyers, consultants, doctors and now software engineers) and the 1% you have a real problem with social mobility.
If a country has decent access to education, it's not unreasonable to aspire to reach the "elite" with some smarts, luck and grit. That fundamental hope is what ticks over the capitalist incentivisation we have based our economics on. It's what inspired my parents to leave their home country and climb many socioeconomic rungs.
If you remove that belief in the system, people start signing out of society and then you have a big problem. Like Brexit. Like Trump.
Then suddenly war doesn't seem so impossible anymore...
When an unbridgeable gap is opening up between even the traditional "elite" (bankers, lawyers, consultants, doctors and now software engineers) and the 1% you have a real problem with social mobility.
If a country has decent access to education, it's not unreasonable to aspire to reach the "elite" with some smarts, luck and grit. That fundamental hope is what ticks over the capitalist incentivisation we have based our economics on. It's what inspired my parents to leave their home country and climb many socioeconomic rungs.
If you remove that belief in the system, people start signing out of society and then you have a big problem. Like Brexit. Like Trump.
Then suddenly war doesn't seem so impossible anymore...
If only there was a way to make living within a city less important.
There must be some way to move large numbers of people over "great distances" (50-100 miles) in a more commutable time.
There must be some way to move large numbers of people over "great distances" (50-100 miles) in a more commutable time.
Not sure if you are being sarcastic. The buyers driving up prices don't live in London.
From the article: "Today, 60 percent of properties for sale in this part of London go to international buyers."
From the article: "Today, 60 percent of properties for sale in this part of London go to international buyers."
I think his point is that if commutes were quicker then regular people could move away from the city but still work there. Billionaires could still sell real estate to each other then without hurting lower incomes.
Commuting into London is already easy, huge amounts of people do it every day.
It is expensive though.
It is expensive though.
I like living in the city. I would prefer to live in one. Denver housing isn't so crazy yet that I can't afford to live here, but it's pretty close. I make a pretty damn good salary and would struggle finding a house that doesn't require significant rennovation in the city. Yes, I could move to suburbia - I could commute slightly further, etc, etc. I would prefer not to. I would prefer that my neighbors are people and not empty apartments used as safety-deposit boxes. (this is not the case in Denver, but sounds to be the case in London and other large cities).
Edit: As an example - in my neighborhood there are $300k houses in pretty sorry shape that are purchased just for the land. They are destroyed and then a $500k new house is built on that land. This is what I'm facing. I could perhaps afford $300k (although I'm gunshy to purchase in such a volatile market), but it would require IMHO another $50k in renovation to make it "livable". I'm not talking about granite counter tops and high-end designer furniture, I'm talking about roof, insulation, water heater, bathroom fixtures, yard work, etc.
Edit: As an example - in my neighborhood there are $300k houses in pretty sorry shape that are purchased just for the land. They are destroyed and then a $500k new house is built on that land. This is what I'm facing. I could perhaps afford $300k (although I'm gunshy to purchase in such a volatile market), but it would require IMHO another $50k in renovation to make it "livable". I'm not talking about granite counter tops and high-end designer furniture, I'm talking about roof, insulation, water heater, bathroom fixtures, yard work, etc.
> I like living in the city. I would prefer to live in one.
I'd bet once a decent public transportation system is inline, the termination points of the larger trains will become as much city-like as the center, but much more affordable.
I'd bet once a decent public transportation system is inline, the termination points of the larger trains will become as much city-like as the center, but much more affordable.
And Denver has a pretty good one! (http://www.rtd-denver.com/) I could go a bit south or a bit west of town and be downtown in 20 minutes. It's on my mind.
Just for comparison purposes, once a large portion of your housing is safety deposit boxes here's the sort of thing you can get for $300K: http://streeteasy.com/building/5-tudor-city-place-new_york/3...
275 sq. ft. with "a half refrigerator, 2 built-in electric burners, and a microwave oven"
275 sq. ft. with "a half refrigerator, 2 built-in electric burners, and a microwave oven"
Yeah, that's nuts. At least $300k gets me a ~1300 sq ft single family dwelling with maybe a detached garage and a yard.
Can't we solve this problem with virtualization? Build houses in the middle of nowhere, but assign a central London address.
And swap them into central london when the buyer shows up at the airport...
People are paying for the location not a "brand".
Haha this is great.
On a more serious note, maybe banks could offer some sort of investment vehicle made up of homes in a certain area. The homes would then be rented out for revenue, and foreign buyers could have an equivalent financial position without driving away actual residents.
On a more serious note, maybe banks could offer some sort of investment vehicle made up of homes in a certain area. The homes would then be rented out for revenue, and foreign buyers could have an equivalent financial position without driving away actual residents.
I think they are also buying the prestige of a cool place to loan to friends and the safety of a cool place to stay if wherever they are from has trouble
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I had a similar idea but with lower and lower ceilings, you could have 100s of apartments at one address with 1cm ceilings, but great sq footage.
Virtualisation probably makes more sense though.
Virtualisation probably makes more sense though.
Or... miniaturize everything. Great square footage, looks huge, but ceilings are only half height. Display it with half size furniture, half size appliances, etc. Money in the bank.
If only there was a way to make working within a city less important.
There must be some way to move large numbers of bits over "great distances" so that knowledge/desk workers can choose where they want to live, and don't have to commute every day.
There must be some way to move large numbers of bits over "great distances" so that knowledge/desk workers can choose where they want to live, and don't have to commute every day.
Why would we want to? I grew up in the Chicago suburban sprawl, and it feels like a tremendous waste of land and infrastructure. I hope we one day figure out how to reduce humanity's physical footprint. Agriculture would obviously be the biggest thing, but compacting living space would help too.
Well, you could limit cars in cities which wastes a lot of space.
http://www.bloomberg.com/news/articles/2014-04-01/american-c...
But then you need to answer my question:
There must be some way to move large numbers of people over "great distances" (50-100 miles) in a more commutable time.
http://www.bloomberg.com/news/articles/2014-04-01/american-c...
But then you need to answer my question:
There must be some way to move large numbers of people over "great distances" (50-100 miles) in a more commutable time.
High-speed rail sounds like it could fit your needs, as long as you could somehow limit the number of stops along that distance that would need to be made, as the time-cost of slowing down, unloading and loading, and speeding back up would likely be the limiting factor in its efficiency and utility to the user.
The trains can be fast and effective over those sort of distances. The trouble is, they terminate at only a few points which tend not to be right in the center, meaning that then getting to where you need to be when you get off of the train takes longer.
E.g. between Stevenage (town North of London) and Kings Cross in the UK, its about 30 miles. Trains do that in 24 minutes. But to then go the final 1-to-3 miles to your central London Office might take another 25-30 minutes - the tube is good, but only if your destination is near a station, buses are slower than walking due to them stopping every 100m, and driving/taxis are obviously not an option due to gridlock.
You can walk it of course, but it will be slower than expected due to waiting to cross streets etc, plus of course it might be raining one day, or 90% humidity @ 25c the next (neither are great for getting to work in a comfortable state!).
For me, the solution appears to be get a job near the station, or perhaps buy one of those electric unicycles.
E.g. between Stevenage (town North of London) and Kings Cross in the UK, its about 30 miles. Trains do that in 24 minutes. But to then go the final 1-to-3 miles to your central London Office might take another 25-30 minutes - the tube is good, but only if your destination is near a station, buses are slower than walking due to them stopping every 100m, and driving/taxis are obviously not an option due to gridlock.
You can walk it of course, but it will be slower than expected due to waiting to cross streets etc, plus of course it might be raining one day, or 90% humidity @ 25c the next (neither are great for getting to work in a comfortable state!).
For me, the solution appears to be get a job near the station, or perhaps buy one of those electric unicycles.
I really like the solution of offering 'public transport bicycles' at stations. I've used it in a number of cities in Holland and seen it in action in Barcelona and (IIRC) Paris.
Barcelona in particular seems to have really gone all-in on this solution. The city, or at least the center, is covered in spots where you can pick up or leave such a bike using a card.
In Holland it's understandably not as widely rolled out because most people have at least one bike in the city where they live, and often a second bike for the city where they work.
Barcelona in particular seems to have really gone all-in on this solution. The city, or at least the center, is covered in spots where you can pick up or leave such a bike using a card.
In Holland it's understandably not as widely rolled out because most people have at least one bike in the city where they live, and often a second bike for the city where they work.
There is. It's full.
(Most of the towns in the southeast of England are dominated by commuters to London)
(Most of the towns in the southeast of England are dominated by commuters to London)
What about the other directions? How many people commute from Birmingham, for example? It's only 126 miles away? That's a 30 commute sometime this century. It's really just a question of when.
I have actually done that commute. The company I was working for relocated to London from Birmingham, I moved with them. However there was a few months when I was still in 'Brum' and having to get stuff setup in London.
I did have options to stay with friends in the Brixton area. However the walk to the bus, the wait for the bus, the bus journey to the Brixton tube, the tube journey to Green Park, the walk from one platform to another, then the connecting tube journey followed by the final walk to the office took longer door-to-door than my commute up/down to Birmingham. I could walk to Euston, hop on the train and get a taxi at the other end. The time on the train was 'productive' rather than noisy and stressful (compared to going south of the river). Fortunately my employers were paying my train and taxi fares, had they not done that then I would not have had an economically viable commute.
Top tip for anyone needing to work in London - don't go by public transport and live somewhere without a tube station. Get a bicycle - it is quicker - or an electric scooter.
Although these central London properties might look like amazing places to live, bear in mind that the air in central London could kill you...
I did have options to stay with friends in the Brixton area. However the walk to the bus, the wait for the bus, the bus journey to the Brixton tube, the tube journey to Green Park, the walk from one platform to another, then the connecting tube journey followed by the final walk to the office took longer door-to-door than my commute up/down to Birmingham. I could walk to Euston, hop on the train and get a taxi at the other end. The time on the train was 'productive' rather than noisy and stressful (compared to going south of the river). Fortunately my employers were paying my train and taxi fares, had they not done that then I would not have had an economically viable commute.
Top tip for anyone needing to work in London - don't go by public transport and live somewhere without a tube station. Get a bicycle - it is quicker - or an electric scooter.
Although these central London properties might look like amazing places to live, bear in mind that the air in central London could kill you...
It is unpalatable to me that we are wasting such a vast quantity of resources on moving people about. Our transport system can barely cope with people travelling modest distances.
"HS2" is under construction which should make it more like an hour, although anyone with experience of UK trains will be skeptical. Today if you said you were commuting from Birmingham on a daily basis people would regard it as a bit extreme. There are people who commute from Barcelona, although not many.
Hs2 is not gonna be cheap...
Well it'll be 49 minutes in 2026 if HS2 goes ahead. (Waste of money though if you ask me.)
According to the visualisation [1], something like 1000 people commute from Birmingham to Central London. Though it's not easy to tell, as London is divided into many statistical areas.
It's 85 minutes at the moment [2], plus the journey from Euston Station to the office in London. 85 minutes is commonly accepted for a total journey, but I'd guess most people with longer journeys are only doing this temporarily.
If you find places closer to London on the map, you'll see many thousands of people make ~30 minute journeys by train into London, before continuing by metro/bus/whatever. (If you can find it, try and click "Westminster and City of London". It's small.)
[1] http://www.neighbourhood.statistics.gov.uk/HTMLDocs/dvc193/
[2] http://traintimes.org.uk/Birmingham/Euston/0800/Monday
It's 85 minutes at the moment [2], plus the journey from Euston Station to the office in London. 85 minutes is commonly accepted for a total journey, but I'd guess most people with longer journeys are only doing this temporarily.
If you find places closer to London on the map, you'll see many thousands of people make ~30 minute journeys by train into London, before continuing by metro/bus/whatever. (If you can find it, try and click "Westminster and City of London". It's small.)
[1] http://www.neighbourhood.statistics.gov.uk/HTMLDocs/dvc193/
[2] http://traintimes.org.uk/Birmingham/Euston/0800/Monday
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There absolutely is, but no one seems to believe it's possible.
It's called SkyTran personal rapid transit. Wikipedia has a page all about it here: https://en.wikipedia.org/wiki/SkyTran With small maglev pods traveling 100-150 mph, a 100-mile commute is actually quite doable in one of these, especially since you can sleep in it as it's automated and takes you door-to-door. If governments would actually invest in this and build it instead of wasting money on boondoggles like high-speed rail, we'd make a gigantic dent in our carbon emissions and roadway deaths, plus save ourselves a lot of time that we waste driving.
It's called SkyTran personal rapid transit. Wikipedia has a page all about it here: https://en.wikipedia.org/wiki/SkyTran With small maglev pods traveling 100-150 mph, a 100-mile commute is actually quite doable in one of these, especially since you can sleep in it as it's automated and takes you door-to-door. If governments would actually invest in this and build it instead of wasting money on boondoggles like high-speed rail, we'd make a gigantic dent in our carbon emissions and roadway deaths, plus save ourselves a lot of time that we waste driving.
There is no way that would get planning permission in central London.
It would have to be underground.
It would have to be underground.
You don't need SkyTran in dense city centers; it can't handle the volume of people that a subway can. SkyTran is an alternative for cars; it can handle a lot more people than cars, and in a far more efficient manner. It's not meant for extremely dense areas, except perhaps as an alternative to taxis (i.e., in places like London or Manhattan, it would have to more expensive than the subways and cater to richer people). The main use-case for SkyTran is for suburbs, inter-city transport (between cities close enough to drive), etc.
The recent Vancouver tax changes have worked, I suspect/hope we'll start seeing that repeated in every city thats had it's life sucked out